Why Eldorado Gold Stock Is Still a Solid Bet

Eldorado Gold has turned in a really solid performance on the stock market so far this year. Shares of the gold miner have soared nearly 170% in 2019, and it is unlikely that the company’s momentum would be dying down anytime soon as its latest results suggest.

Eldorado Gold’s recently released fiscal second-quarter results give us a clear insight into the reasons why the miner’s rally has room to run higher.

Eldorado Gold is Pulling the Right Strings

Eldorado Gold produced 91,803 ounces of gold during the second quarter of 2019, which was lower than the year-ago period’s output of 99,105 ounces. However, investors should keep in mind that the company was able to place more gold ounces on sale this time.

Eldorado’s gold sales came in at 113,685 ounces during the quarter as compared to the year-ago period’s sales of 94,224 ounces. This massive spike in Eldorado’s production was a result of the inclusion of 48,821 ounces from Efemcukuru.

Shipments at that mine had been delayed in the first quarter, so they boosted the company’s performance this time. Eldorado’s shipments were also boosted by the production from the Lamaque mine, which supplied 24,330 ounces during its first quarter of commercial operations.

However, higher sales were not the only catalyst for Eldorado last quarter. The company witnessed a nice increase in the average realized gold price that came in at $1,321 an ounce during the quarter, up from the prior-year period’s price of $1,287 an ounce.

At the same time, Eldorado managed to keep a handle on its cost profile. Its all-in sustaining costs of $917 an ounce was lower than the prior-year period’s figure of $934 an ounce. The lower all-in sustaining costs were a result of a spike in the company’s sales volume last quarter.

Thanks to the higher sales volumes, better gold prices, and lower costs, Eldorado Gold posted a GAAP net profit of just over $12 million as compared to a net loss of $24.4 million in the year-ago period. Looking ahead, Eldorado Gold can sustain its performance thanks to new production coming online.

More Catalysts Lie Ahead for Eldorado

Eldorado Gold is on track to meet its annual guidance for the year. The company expects to produce between 390,000 ounces and 420,000 ounces of gold in 2019 and this figure is expected to jump sharply higher in the coming years.

Eldorado has given a production forecast of 520,000 ounces to 550,000 ounces of gold for next year. This production increase will be driven by the resumption of mining at the Kisladag mine, as well as the ramp-up at the Lamaque mine. More importantly, the higher production at Eldorado will be accompanied with a lower cost profile.

The company has pointed out that it expects all-in sustaining costs between $867 per ounce and $967 per ounce for the next couple of years. This is well below the $994 an ounce all-in sustaining cost the company had recorded in 2018.

Throw in the improvement in gold prices and you have a winner on your hands. So there are several reasons to stay long Eldorado Gold despite its strong run this year.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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Harsh, what do you think about the Shelf Offering


HI Harsh, what are your thoughts on the Shelf offering